The election is nearing the finish line for states to enter their electoral votes by mid-December. Since then, COVID-19 continues to intensify and spread, and now two Senate elections in Georgia may determine how much the new president can accomplish, as well as how he and Congress might determine the future direction of the 340B program. While the executive branch and legislature traditionally limit their activities during the post-election lame-duck session, that’s not what’s happening this November. In this month’s 340Buzz, we’ll look at a flurry of legislative activities related to 340B: bills introduced, letters proffered, new rules for alternative dispute resolution, most-favored-nation pricing and Medicare Part D rebates. We’ll also share some of the buzz on who may be joining the new administration in key health policy roles.
A slow start and a fast finish — Manufacturing and legislative activities
Novartis announced it would scale back its decision to restrict 340B drug sales and would provide discounted drugs to contract pharmacies – but only those pharmacies within 40 miles of the 340B hospital’s location, leaving out critical specialty pharmacy access and rural locations. Groups representing 340B hospitals characterized the announcement as unlawful new restrictions that will negatively affect patient access to rural and specialty pharmacies.
U.S. Rep. Bruce Westerman (R-Ark.) and U.S. Sen Mike Braun (R-Ind) recently introduced a bicameral bill, the Fair Care Act of 2020, that would impose reporting requirements on 340B DSH, children’s, and free-standing cancer hospitals. It would also require federal watchdog agencies to report data from their main and child sites on patient insurance status, charity care costs and aggregate acquisition costs and reimbursements for 340B drugs. Groups representing 340B hospitals and other 340B-covered entities are reacting to the bill, citing government and manufacturer overreach. This is a taste of the kinds of bills we’re likely going to see in 2021 — with neither bill expected to get significant traction in either legislative body. We should note that appropriations language was passed recently that included 340B language, and which requested that Health Resources and Services Administration (HRSA) audit manufacturers.
On November 13, a bipartisan group of 217 U.S. Representatives asked HHS Secretary Alex Azar to take immediate action to stop drug companies and a vendor from changing the 340B program from a discount to a rebate model. In spite of this bipartisan request by nearly half of U.S. House members, the HHS Secretary has yet to respond.
Binding administrative dispute resolution
On November 17, ten years after it was required to do so, HRSA sent to the White House for approval a final rule that would create a binding administrative dispute resolution (ADR) process for the 340B program. The rule would be used to settle disagreements between covered entities and drug manufacturers. The contents of the rule are not yet known as it awaits final approval from the White House Office of Management & Budget (OMB). Once approved, the rule may take up to 60 days before it is implemented.
Until we know the rule’s contents, stakeholders are uncertain as to whether it is similar to one that HRSA proposed and published in 2016. That rule established a panel of federal employees who would resolve disputes between covered entities and manufacturers when parties were unable to resolve them through good-faith efforts. Rulings by the panel would be binding unless invalidated later in a lawsuit. Regardless, the new rule only applies to disagreements involving covered entities and manufacturers and does not address the current disagreement over 340B drug pricing for drugs dispensed at contract pharmacies.
While champions for 340B hospitals and other 340B-covered entities are waiting to examine the contents of the final rule, there is concern over the time it would take to implement it, the mechanics of how long a dispute could take to be adjudicated, and the significant loss of money that would occur as a result of lack of access to 340B savings in the meantime. Once it’s released, Sentry will provide a full analysis of the final rule and its implications to the 340B community.
Most Favored Nation drug pricing rule
In its most sweeping move on drug prices to date, the Trump administration released federal drug pricing regulations to lower what Medicare pays for 50 drugs based on prices paid in other developed nations. Under the Most Favored Nation (MFN) Model interim final rule, federal health officials will establish a payment model to test changes in how Medicare pays for certain drugs and biologicals administered by hospitals and physician offices and paid for under Medicare Part B.
The payment model will be mandatory for hospital outpatient departments and other Medicare Part B participants, including 340B covered entities. However, it creates exceptions for cancer hospitals, critical access hospitals, children’s hospitals, federally qualified health centers, and Indian Health Service facilities.
The MFN Model is expected to be phased in over a multi-year time period beginning Jan 1. In the first year, 340B hospitals will still be able to obtain eligible drugs at 340B prices. In subsequent years, they will be reimbursed for those drugs based on most-favored-nation pricing or whichever price is lower for the beneficiary.
The executive order is the result of a failure to reach an agreement between the Trump administration and the pharmaceutical industry, which has long battled any price controls. Health policy observers expect possible litigation to block the pricing model before it can be implemented, and the Biden administration is expected to carefully evaluate the new rule during the current transition period. Generally, the Most Favored Nation drug pricing rule is much closer to ideas previously proposed by Democrats than Republicans, increasing the likelihood that a Biden administration would eventually retain it, after a pause for careful consideration.
Sentry will continue to analyze and report on developments related to the new policy model and its impact on 340B program and participating hospitals.
HHS finalizes rule to bring Medicare Part D discounts directly to seniors
On November 20, HHS Secretary Alex Azar and his Office of Inspector General (OIG) finalized a regulation that encourages lower list prices and reduces out-of-pocket spending on prescription drugs. The regulation is aimed at removing the incentives that reward list price increases, which ultimately increase the out-of-pocket price to consumers. To do this, the regulation excludes rebates on prescription drugs paid by manufacturers to the pharmacy benefit managers (PBMs); it also excludes Part D plans from safe harbor protection under the Anti-Kickback Statute (AKS). Effective Jan. 1 2022, the regulation creates a new safe harbor protecting discounts reflected in the price of the drug at the pharmacy counter, saving customers out-of-pocket costs.
The new administration – Lots of shoes to fill
According to our friends at the Partnership for Public Service, a nonprofit organization that advises presidential candidates on the transition, President-elect Biden needs more than 4,000 political appointees to fill out his administration, 1,200 of whom require Senate confirmation. There are also 700 key executive branch nominations that must go through Senate confirmation, 152 of which are currently vacant.
Biden has already started building his transition team, with new members being added almost daily. With that in mind, let’s concentrate on key health policy jobs and what we’re starting to hear already. The buzz is growing louder around these potential appointees for various positions:
- New Mexico Governor Michelle Lujan Grisham
- North Carolina HHS Secretary Mandy Cohen
- Former Surgeon General Vivek Murthy
- Chiquita Brooks-LaSure, a former HHS official who helped lead the department’s steps to carry out the ACA
President-elect Biden has already named Mary Wakefield, who ran HRSA during most of the Obama administration, to serve on his transition team for HHS. Knowing her background and having worked with Mary previously, I can share that she’s very “rural-friendly” and has a rural agenda. In her previous tenure in the government, Mary was typically pro-340B and had a focus on improving healthcare in the safety-net through the Patient Safety and Clinical Pharmacy Services Collaborative.
Another feature of the transitionary period between presidents is that regulations in process (not finalized) from the previous administration are normally put on hold during the transition time period for further analysis and evaluation by the incoming transition team. Quite often, these policies and regulations never see the light of day. In this transition, that could include the recently approved OPPS payment rates, the Most Favored Nation drug pricing rule and possibly others.
In December, we’ll continue to follow the presidential transition, the appointment of key health policy executives to posts in HHS, HRSA and other agencies, and monitor the latest 340B developments. We are grateful this holiday season to serve the safety net and their communities through these difficult times. As always, whatever challenges the industry faces, Sentry will be here along the way as a voice for covered entities and to support you in your effort to optimize the 340B program and serve vulnerable patients.